Tuesday, May 31, 2011

May 2011 Portfolio Summary and Review

May 2011 was indeed an interesting month, as it was the month of Singapore’s General Elections 2011. The Election results are widely-known by now, and the Opposition made a breakthrough in being able to secure a GRC, a feat which had never been achieved since GRCs were introduced in 1988. May 2011 also saw the release of financial results for SIA Engineering, Kingsmen Creatives and Boustead; and saw two more dividends being declared (more details in each company’s summary). Cabinet shuffles also made headlines as Minister for National Development Mah Bow Tan finally stepped down after 12 years at the helm of Housing, to be replaced by ex-Health Minister Khaw Boon Wan. It will be interesting to note what effect this will have on property prices, which has been a major gripe for most people who are striving to purchase an affordable flat. COE prices also saw a steady rise to a five-month high, even as the Transport Minister Raymond Lim steps down, to be replaced by Lui Tuck Yew.

To avoid being overly long-winded (again), let me dive right into my portfolio and corporate summaries. My portfolio and comments for May 2011 are as follows:-

1) Boustead Holdings Limited – Boustead released their FY 2011 results on May 26, 2011, along with the usual LIVE audiocast where listeners can write in to ask questions which will be answered immediately by Management (including CEO FF Wong). Revenue for FY 2011 hit a record high of $560.6 million, and gross margin rose to 32% as cost of goods sold increased only 25% while revenues increased 28%. I had expected a full write-down of Boustead’s Libyan projects (both the Al Marj Township and the Waste-water project), but the impact on 4Q 2011’s bottom line was still unnerving. 4Q 2011 registered a loss of $1 million as a result of the write-downs of about $13.8 million in total. However, note that this is a one-off event and does NOT impact cash flows.

In fact, I was pleasantly surprised when the Company announced a bumper dividend consisting of 2 cents/share final dividend and 3 cents/share special dividend, making it a total of 5 cents/share. For FY 2011, total dividend inclusive of interim dividend of 2 cents/share came up to 7 cents/share, which represents a yield of 7% based on the last closing price of $1.00 as I type this (on May 26, 2011). Apparently, the Company’s cash generation ability remains strong despite their Libyan setback, but moving forward, I also have to ask hard questions as to whether they can continue to grow their top-line and bottom-line, as well as what plans and strategies they intend to employ to achieve their goals.

I will be preparing a detailed analysis of Boustead’s FY 2011 results in subsequent posts (after SIAEC’s analysis has been done) and also include a full transcript of the audiocast as in the two previous years.

Hot from the oven was an announcement just this evening of Boustead Projects snaring a $23 Million Design and Build contract for Bell Helicopter MRO Hangar Facility (artist rendering above). This will take up about 15,000 square meters and be completed in 2Q 2012.

2) Suntec REIT
– There was no news for Suntec REIT for May 2011. The dividend of 2.388 cents/share was received on May 30, 2011.

3) MTQ Corporation Limited – As I had already done a detailed three-part review and analysis of MTQ in my previous three posts, I will not add anything else in this portfolio summary.

4) GRP Limited – There was no news for GRP for May 2011, though there was a one-page write-up in The Edge Singapore on the Company. In the article, it was mentioned that GRP was on the lookout for synergistic acquisitions to utilize its cash hoard, and will be looking to divest its uPVC business if it continues to bleed. A worthwhile read, and too bad it does not give me extra comfort as a shareholder that Management is aware of what it plans to do with its 9 cents/share worth of cash!

5) Kingsmen Creatives Holdings Limited – I did a brief write-up on Kingsmen AGM this month, and Kingsmen also released their 1Q 2011 results on May 6, 2011. Revenues fell 22% while gross profit dropped 11%, and the positive aspect was the rise in gross margins from 26.4% to 29.9%, possibly as a result of smaller parcels of work which command higher gross margins; as well as the strength of Export Fixtures which also yields better margins.

The main culprits affecting net profit were staff costs (down just -2.1%) and "other expenses" which actually increased 10% despite the drop in gross profit. I understand from the AGM that Kingsmen were hiring more designers in SEA in order to prepare for theme park projects and also to boost their Interiors segment in China and North Asia; so I guess this is one expense which is hard to keep low. Even the GM Andrew Cheng grudgingly admitted that staff costs were an aspect of expenses which was tipped to rise. The result was a drop in net profit by 42%, and net margin was only in the 3-4% region. Since 1Q is traditionally Kingsmen's weakest, it would not be fair to say that it represents the entire financial year.

Balance Sheet remains strong with current ratio at 1.60, and cash has increased to $30.8 million against a reduced debt level of $4.9 million (versus $5.3 million a year ago). Cash from Operating activities was a +ve $1.8 million and capex was $365K, so there was +ve FCF.

Division wise, M&E saw a drop in revenue as 1Q 2010 recognized some additional projects which were not present in 1Q 2011. Interiors was the shining star with revenues increasing further by 18.7%. It stands to reason that if staff costs can be kept in line as a result of this advance hiring, then if M&E secures more theme park projects in the next few months; and Interiors continues to do well, there would be an improvement in the net margin and net profit levels in 6M and 9M 2011 results. Since cash flow continues to be strong, I'd also expect Kingsmen to at least maintain their interim dividend of 1.5 cents/share.

The order book as at May 5, 2011 now stands at $154 million, of which $138 million is expected to be recognized in FY 2011. Compared to last year, contracts secured was only $133 million, so the order book has increased by $21 million. I believe this quarter's poor result is also due to the timing difference in revenue recognition, hence we have to look at 6M and then 12M performance to see how things pan out. I will not be doing a detailed analysis and review until 1H 2011 results are released in August 2011.

The final dividend of 2 cents/share and special dividend of 0.5 cents/share was received on May 24, 2011.

6) SIA Engineering Company Limited – SIA Engineering released their FY 2011 results on May 10, 2011. FY 2011 earnings rose 9.5% compared to FY 2011 to S$258.5 million, and the surprise was that a special dividend of 10 cents/share was declared in addition to a final dividend of 14 cents/share, bringing total dividend declared to 24 cents/share. Coupled with the interim dividend of 6 cents/share already paid out, SIAEC is paying out 30 cents/share for FY 2011, and this can be attributed to their strong FCF generation capability. I will be doing a detailed analysis and review for SIAEC in June 2011 so I will not add too much detail here.

Portfolio Review – May 2011

Realized gains have increased to S$59.2K as a result of Kingsmen Creatives going ex-dividend for its final cum special dividends. SIAEC and Boustead are still cum-dividend and thus the amounts have not been added to realized gains as yet.

For the month of May 2011, the portfolio has dropped by -1.3% (using XIRR in MS Excel to compute) against a -0.9% fall in the STI; thus under-performing by -0.4 percentage points. This was slightly better than April 2011’s under-performance of -2.3 percentage points. Cost of investment remained at S$210K and unrealized gains stand at +13.1% (Portfolio Market Value of S$237.5K).

I am aware that Kingsmen’s Comprehensive Analysis Part 5 is still outstanding, and I must apologize for not completing it sooner, but I have work commitments, family commitments and also my analyses for existing companies’ full-year results. At the same time, I am also finding time to go to the gym to stay healthy, as well as devoting some time for quality family bonding. There is also an intention to continue my series on Porter’s Five-Forces as well as Behavioural Finance, and I have a topic or two on valuations coming up as well as I have been thinking about this very often while I travel on public transport.

June 2011 is expected to be a very slow and boring month in terms of corporate news, as no results are slated for release until July 2011 (for Suntec REIT).

My next portfolio review will be on June 30, 2011 (Thursday).


Singapore Man Of Leisure said...

Hello MW,

I just started using XIRR beginning of this year (stolen with pride from CW8888). And math is not exactly my favorite subject...

Your portfolio has clearly beaten the STI year to date in money terms. So I am a bit confused why in XIRR percentage terms you are underperforming?

Or have I missed something?


风隐(Phileas.Wind) said...

Hi MW,
I have to say your posts are very informative and contain lot of details on company fundamental analysis.

I guess detailed analysis of a company's business is definitely a must do for serious investor. I have learned much from your posts on Kingsmen and Boustead.

Really thanks for the sharing of value investing info and analysis methodologies. :)

John said...
This comment has been removed by a blog administrator.
Musicwhiz said...


Erm....well I followed the formula and advice from some people and blogs on using XIRR, where I indicated the value of my portfolio as at 31 Dec 2011, and it churned out -1.3% haha. This is including all dividends received to date.

What do you mean by "in money terms"? Need to clarify on that as I am a little confused. Thanks!


Musicwhiz said...

Hi Phileas,

You're most welcome. I am very glad the posts have benefitted you, and please do continue to visit.

On my part, I usually have a lot of topics and content to blog about - the only problem is time, and the ability to find the inspiration to properly articulate my thoughts. Otherwise, this is an enjoyable process for me, and I also get to learn and mature as an investor over time.



Singapore Man Of Leisure said...

Hello MW,

Your portfolio cost is 210,000
The market value end May is 237,500

I was scratching my head why it can be minus 1.3 % using XIRR?

Shouldn't it be a profit instead also in % terms?


Musicwhiz said...


It is a -ve percentage because my start point of reference is the market value of portfolio as at Jan 1, 2011. This is adjusted for additions, dividends and withdrawals using XIRR. Hence, even though there were injections, the XIRR formula shows that there was still a loss in portfolio value.

Hope this explains!


Singapore Man Of Leisure said...

Thanks MW!

So it's an accounting or statistical treatment thing - not something "real".

Blue is a good colour to have in your gain/loss column ;)

Rock on!

Musicwhiz said...


I won't call it an accounting entry per se. It's an accurate way of measuring returns if the cash flows are adjusted for time value and realized gains/losses. Of course, I also use a blended yield basis to see if I am getting an overall yield better than inflation; and I also strive towards decent capital gains over the years as the businesses I own improve. That's the objective of investing - own good businesses for the long-term and get paid a decent yield at the same time!


Jack Phang said...


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Have a nice day!


Musicwhiz said...

Hi Jack Phang,

You have a very interesting blog! So you invest in both SG and MY equities. I will definitely be visiting your blog more often to read the older entries.

Thanks for visiting too!